Inflation in the U.S. could rise to highs of 20%. Those are sentiments echoed by Jeremy Siegel, Finance professor at the Wharton School of the University of Pennsylvania. According to the professor, the easy monetary policy stance spearheaded by the Federal Reserve will be the catalyst to accelerate the inflation spike.
The sentiments come hot on the heels of inflation jitters rattling the market the past week. Consumer Price Index data shows that products of items are rising significantly, fuelling concerns that the FED may be forced to act. Stocks came under pressure the past week as CPI data jumped a stronger than expected 4.2% year-over-years.
Amid the rising inflation, Siegel warns that investors will have little in the way of an alternative to equities and other traditional inflation hedges. As it stands, bonds and cash have little appeal, one of the reasons investors will have little in their way of an alternative to equities or other traditional inflation hedges.
FED chair Jerome Powell has already indicated that he will continue maintaining an easy policy stance even as inflation pressures continue to build. The FED officials have already reiterated that inflation will continue to surge in the coming months, given the pent-up demand for goods and services and supply constraints.
Oil Markets Stability
In the oil markets, stability is slowly creeping in, in the wake of the Colonial Pipeline incidence. Supply and demand fundamentals have remained relatively consistent as U.S. inventory were little changed the past week as production held steady at 11 million barrels per day.
OPEC is holding steady its demand forecast for 2021 even as a surge in coronavirus cases in India continues to arouse concerns. Demand concerns have been shrugged in recent weeks, with prices stabilizing above the $60 a barrel level. Oil prices at above $60 a barrel should continue to offer a good setup for E&P cash flows allowing for capital inflows in the second half of the year.